Malthus and Marx: Comprehensive Critiques of Classical Political Economy

Thomas Robert Malthus ($1766$-$1834$): Biography and Foundations

• Biographical Overview:     - Lifespan: Born in Westcott ($1766$) and died in Bath ($1834$).     - Tradition and School: Part of the Classical Economics tradition and the Classical Political Economy school.     - Intellectual Influences: Influenced by Jean-Jacques Rousseau and David Ricardo.     - Notable Professional Roles:         - Professor of History and Political Economy at the East India Company College.         - Clergyman in the Church of England.

• Notable Works:     - Essay on the Principle of Population ($1798$).     - Principles of Political Economy ($1820$).     - Definitions in Political Economy ($1827$).

The Malthusian Principle of Population

• The Two Postulata:     - Malthus establishes two fundamental assumptions («postulata») for his theory:         1. First: Food is necessary to the existence of man.         2. Second: The passion between the sexes is necessary and will remain nearly in its present state.

• The Core Discrepancy:     - Malthus argues that the power of population is indefinitely greater than the earth's power to produce subsistence for man.     - Population Growth: When unchecked, population increases in a geometrical ratio.     - Subsistence Growth: Subsistence only increases in an arithmetical ratio.     - Malthus notes that «a slight acquaintance with numbers will show the immensity of the first power in comparison with the second.»

• Tension and Conflict ('A War'):     - This discrepancy creates a constant tension between human reproduction powers and food production.

• Checks (Constraints):     - Exogenous Checks: Factors external to the individual's direct control.     - Endogenous Checks: Factors originating from within the system or individual behavior.     - Preventive Checks: Measures taken to decrease the birth rate.

Growth, Stationary State, and Wage Dynamics

• Real Wages Equilibrium:     - Real wages tend toward a fixed level of subsistence in the long run.     - Physiological Version: Focuses on the current physical needs for survival.     - Psychological Version: Forward-looking, incorporating perceptions of future needs.

• Causal Mechanisms (The Dynamics of Shocks):     - Good Season Shock: Leads to higher per capita wages, which results in higher birth rates and a growing population.     - Population Growth Impact: A growing population eventually leads to lower per capita wages, falling birth rates, and a subsequently decreasing population.

• Criticisms of the Malthusian Model:     - Mortality rates and changes.     - Technological progress (which can increase food yields).     - International trade (allowing for the import of food).

Production, Diminishing Returns, and Land

• The Law of Diminishing Returns:     - Diminishing increments of output are obtainable from additional units of input.     - Malthus specified that this law applied exclusively to agriculture.

• Natural Resources and Fertile Land:     - Nature imposes limits through the fertility of the land.     - Landlords are viewed as potential improvers or investors in land productivity.

• Attributes of Land and Necessaries (Principles, $1820$):     1. Output Surplus: The quality of the earth allows it to yield a greater portion of the necessaries of life than is required to maintain the persons employed on the land.     2. Self-Creating Demand: Necessaries of life, when properly distributed, create their own demand or «raise up a number of demanders» proportional to the quantity produced.     3. Fertility Scarcity: The comparative scarcity of fertile land, whether natural or artificial.

Markets, Distribution, and Economic Policy

• Critique of Say’s Law:     - Malthus argued for a distinction between goods:         - Essentials: Gluts (excess supply) are impossible because they create their own demand.         - Non-essentials: Market clearing depends on the consumption of high-income classes; gluts are possible here.

• Long-run Distribution Dynamics:     - Rents vs. Profits: As rents ($R$) increase, profits ($P$) tend to decrease.     - Wages vs. Profits (The Profit Squeeze):         - Increased capital accumulation leads to increased population.         - Population growth increases food prices.         - Higher food prices lead to higher money wages.         - Higher money wages result in lower profits (the squeeze).

• Economic Policy Recommendations:     - Production: Focus on agricultural self-sufficiency as a nation. Encourage investment that raises productivity.     - Non-essential Goods: Encouragement of «unproductive expenditures» to address idle labor and maintain land productivity.     - Market Stance: Generally an advocate of the free market; opposed social benefits like the Poor Laws.     - Government Intervention: Occasionally supported protectionism, specifically the Corn Laws to protect domestic agriculture.     - Population Control: Proposed «weak proposals»; opposed contraceptive practices and emphasized the «family responsibility to educate.»

Karl Marx ($1818$-$1883$): Biography and Intellectual Framework

• Biographical Overview:     - Lifespan: Born in Trier ($1818$) and died in London ($1883$).     - Tradition and School: Classical Political Economy; founder of Marxian Economics.     - Influences: Ludwig Andreas von Feuerbach and Friedrich Engels.     - Notable Professional Roles:         - Journalist.         - Member of the General Council of the First International Workingmen’s Association.

• Notable Work:     - Das Kapital [Capital: A Critique of Political Economy] (Volumes published in $1867$, $1885$, and $1894$).

Marxian Theory of Value and Exchange

• The Input Approach to Value:     - Labour is the only productive agent.     - Value can be "stored-up."     - The source of value is labour-time.

• Labour-Power:     - Defined as the sum of subsistence and training costs.     - Socially Necessary Labour-time: The amount of labour-time required to produce an article under normal conditions of production.

• Market Exchange:     - A commodity is a prerequisite for value.     - Relative Prices: Reflect labour-inputs expressed in money terms.     - Transformation Problem: The complex relationship between value (based on labour) and price (which includes profits).

Production, Capital, and Surplus Value

• Hierarchy and Ownership:     - Capitalist production is defined by the ownership of the means of production, which grants bargaining power.     - Labour-time demanded by capitalists exceeds what is necessary for the worker's maintenance.

• Composition of the Working Day:     - Working Day = «maintenance» labour-time + «surplus» labour-time.

• Categories of Capital:     - Constant Capital ($c$): Raw materials, plant, and equipment (represented as depreciation allowances). This is «passive labour» or past labour-inputs.     - Variable Capital ($v$): The wage bill. This is «active labour» and is the «source of more value than it has itself.»

• Surplus Value Expropriation:     - If unpaid labour (accumulated by capitalists) increases too rapidly and requires extra paid labour, wages rise.     - This rise in wages diminishes unpaid labour until surplus-labour is no longer supplied in «normal quantity,» causing a reaction where accumulation falls and wage rises are checked.

Technology, Accumulation, and Displacement

• Role of Machinery (Technology):     - Machinery determined the pace of work and increased the eligibility to work.     - Effects: Increased labour productivity, falling value of commodities, and a rise in the rate of surplus value.

• Capital Accumulation and Competition:     - Acquisition of machinery leads to the «cheapening» of commodities and increased competitiveness.     - Limits: Accumulation is only pursued as a worthwhile investment, which often involves displacing labour.     - Effects: Concentration and centralization of ownership; maintenance of power positions.

• Law of Population in Capitalism:     - The labouring population produces the means (capital) by which it is made «relatively superfluous,» turning it into a «relative surplus population.»     - Marx rejects Malthus’s abstract laws, stating that every historic mode of production has its own historically valid special laws of population.

Long-run Dynamics and Economic Policy

• Dynamics of Collapse:     - Accumulation of fixed capital leads to a rise in the «reserve army of unemployed.»     - This results in social tensions and eventually revolution, leading to a new economic order.

• Distribution and Crisis:     - Marx does not distinguish between profits and rents, categorizing them as «net revenue.»     - Real wages gravitate toward subsistence.     - Reinvested profits require a delicate balance; falling profits lead to instability.     - Crisis is considered intrinsic to the capitalist system.

• Marxist Economic Policy:     - Production: Industrial concentration leads to centralization, collectivism, and socialization.     - Labour: Replacement of hierarchical industry with self-management systems.     - Population: Critique of Malthus; Marx argues labour should not be forced to adjust to capital.     - Course of History: Growth and collapse are governed by forces of history; no policy can alter the course toward systemic collapse.

Final Remarks and Academic Context

• Malthus’s Contributions:     - Inspired by genuine concerns for well-being and economic growth.     - Theoretical focus on limitations for improvement.     - Influenced policy debates on post-war unemployment and the social benefits system.

• Marx's Critique of Political Economy:     - Viewed economics as an evolutionary science.     - Economic laws are contingent and serve as determinants of social relationships.     - Abstract models are often used as «rhetorical devices.»     - Economic problems are rooted in the nature of capitalism, making reform impossible.     - Marxian economics is categorized as Heterodox economics, providing a critique of mainstream theories.